Ladies and gentlemen, good day and welcome to the CSB Bank Q3 FY 2024 earnings conference call hosted by YES Securities. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shivaji Thapliyal from YES Securities. Thank you and over to you, sir. Thank you, Dorwin. Good evening and a warm welcome to all those who have joined the call. The CSB Bank management is represented by Mr. Pralay Mondal, Managing Director and CEO, Mr. Satish Gundewar, Chief Financial Officer, and Mr. B. K. Divakara, Head Strategy and Corporate Legal. We specifically thank the management of CSB Bank for giving YES Securities the opportunity to host their results call. The management will first be making some opening remarks, after which we will throw the floor open for questions. I now invite the management to make their opening remarks. Pralay, over to you. Thank you, Shivaji and Dorwin. Thank you so much for hosting this call, and thank you all of you for joining our post-results call of Q3 FY 2024. To start with, I think globally the high-rate regime has picked out, with many central banks now indicating a pause and a subsequent cut in rates. Inflation has also moderated significantly despite some uptick last month due to this effect. Geopolitical risks, however, persist. Prolonged Red Sea blockages could spike the oil prices again. With this probability of rate cuts in the next one year, it has come down to three from five in the U.S., and the Eurozone has extended its pause at least till June 2024. On the domestic side, I think Indian inflation has showed some moderation, though the CPI turned higher from 5.55 in November, though it was slightly better than what was expected. On an average basis, the core and headline numbers are showing moderating trends. This also suggests that the rate-hike cycle in India has peaked and is more inclined towards moderation in future. The main concern, however, has been the persistent liquidity deficit in the banking system, which even touched INR 300,000 crore in the recent past. It adds to bank borrowings and deposit costs. We expect the liquidity conditions to improve in FY 2024 to 2025. With credit growth outpacing the deposit growth in the banking sector, even in this last quarter, the deposits are likely to remain elevated in the entire FY 2023 to 2024. On CSB numbers, we had a steady Q3, and we could grow faster than the system, maintaining a mean above 5% both on a quarterly and a nine-month basis. Highlights of our performances are as below. The bank declared net profit of INR 415 crores for the nine months ended 31/12/2023, up by 6% over the corresponding period last year. Q3 FY 2024 peaked at INR 150 crores, a 13% increase over Q2 FY 2024. Operating profit witnessed growth of 9% on a nine-month YOY basis. Q3 FY 2024 is up by 12% over Q2 FY 2024. Provisioning buffer of INR 167 crores over and above the regulatory requirements has been taken. Despite margins being under pressure for most of the banks in a highly volatile market, we could maintain a mean of about 5% on both a nine-monthly basis and a quarterly basis at 5.11% and 5.10%, respectively. On a sequential basis, cost of deposits increased from 5.22%- 5.42%, while yield on advances improved from 10.88%- 11.49%. Healthy ROA of 1.78% and 1.84% as on 31/12/2023 on a nine-month and quarterly basis annualized, respectively. On the liability side, deposit grew by around 21% YOY as against the industry growth of 13%. CASA, we had a muted growth relatively at around 6% YOY, and TD grew by around 27% YOY. On the asset side, net advances grew by 23% YOY. Industry had grown around 16% without the margin impact. Gold portfolio registered a growth of 23% YOY on a net basis. Portfolio buildup has happened across all sectors. Gold, other retail advances, and SME did well in the quarter with a YOY growth of 23%, 44%, and 28%, respectively. On a YOY nine-month basis, our yield on advances improved by 39 dips to 11.19%. On the asset quality matrices, stable asset quality, GNP of 1.22, NNP of 0.31, PCR of 75% without write-off, and we continued with accelerated loan provisioning policy in excess of ROA requirements. On the capital side, CRAR of 22.99%, low proportion of risk-weighted assets compared to the industry, partially because the gold loan portfolio is high in our bank. Shareholder allocation on a nine-month basis, we had an attractive EPS, book value per share, ROE. ROE underlines our firm commitment towards the maximization of shareholder wealth. Book value per share touched ₹200. EPS as on 31/12/2023 on a nine-month annualized basis is 31.78%, ROE 17.29%. In conclusion, I would like to say that the market is offering ample opportunities for banks to grow the asset book. In order to cap the same banks' potential sufficient liquidity and funds, the tight liquidity conditions prevailing in the market, which is in the deficit mode now, is making the job tougher for the banks. Cost of deposits and borrowings is at an elevated level. Banks have to carefully manage multiple factors like CD Ratio, LCR, NSFR, etc. Fortunately, most of these criteria we have fared pretty well in this quarter. Hope by this time you might have gone through our numbers uploaded on our website. Here, we sincerely believe that we have done exceptionally well under the given circumstances as we could balance the growth cost and liquidity aspects in a tight liquidity and competitive environment with most of the ratios showing an improvement. We look forward to doing better in this quarter as well. Lastly, the additional recognition I want to talk about as the best bank. We got the Best Bank Award in the small category in the prestigious BFSI Award in 2023, and the commencement of CBS Migration Project are propelling us resolutely towards fulfillment of our vision as CSB 2030, wherein we aspire to become one of the most respected mid-sized banks. We had just launched our CBS project. We are probably one of the first banks to do Oracle, OXA, OGL all together in one transition at one go. We'll be leveraging our full-service banking license and building a pan-India franchise. We'll also be pursuing the branch expansion as a key strategy to fuel the growth. Our management team is now complete, and the entire senior management team has joined, including the induction in the CRO position, in the treasury position, and also we had our wholesale banking head, who has just joined us now. With that, we expect that our wholesale, SME, gold, and retail, all of that will be the future cylinders of growth of the bank in coming years. With that, I would open this conference for questions. Thank you very much. Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mona Khetan from Dolat Capital. Please go ahead. Yeah. Hi, sir. Good evening and congratulations on a good set of numbers. So my first question is on growth. So if I compare versus last quarter what you gave in your PPT, the segmental loan books, the SME growth has been flattish. So how are you looking at it? How have been the disbursement trends here? And is it more to do with the rundown that you've been alluding to in the portfolio? Thank you, Mona, for your question. On gold, I'll ask a growth question. Is it? I didn't get that exact question. Yeah. I'm trying to understand the growth. So if I look at Q-on-Q, which is last quarter versus this quarter, the SME growth was flattish, growth in the SME books. So I'm just trying to understand because this is your core portfolio, why are you seeing a flattish growth? And if it has to do something with the rundown in the portfolio that you've been alluding to some time back, and if you could give us some color on the disbursements in this book. So let me answer the gold question first. So yes, I think we had a 23% growth year-on-year on gold. And actually, in terms of disbursement, we had a relatively muted quarter on the gold side. There are two, three reasons for that. We just wanted to balance the portfolio a little bit more between gold and on gold because with this growth, also, gold is touching 48% of our portfolio, and hence we need a more balanced portfolio. The second thing is on gold, our LTV, we remain focused on gold with a 74% LTV. When you look at that kind of an LTV, there are a lot of players in the market who are willing to give higher LTV, but we don't want to take a higher risk because I still think that though global gold prices have come down slightly only, but still it is reasonably elevated. So given that, we don't want to take a higher LTV on gold at this point of time. That's why we are cautious on that side. And thirdly, we had put a lot of implementations on the gold from a system perspective. And because of those kinds of implementations, we have slowed down certain portfolio on the gold loan side, which we would like to continue to do. Because the other side of the portfolio, whether it is wholesale, SME, retail, etc., is starting to pick up now gradually, so we want to kind of manage the gold loan with a lesser risky, more compliant, and kind of with a price volatility, we should be able to manage. So that's the reason you'll see that our gold loan LTV has been reasonably stable, well below 75%. Coming to your question on SME, I think we have grown by around 28% year-on-year. Quarter to quarter, obviously, things can happen because there are certain times when because what has happened is I'll tell you the issue on both wholesale and SME. You didn't ask me the wholesale, but let me also say that wholesale also has slowed down a little bit, and same to some extent SME because we had seen that the cost of funding is going up in the system. And given our mean kind of objective, we actually didn't want to do businesses which would be very, very competitive in terms of interest rate. Because then what will happen is interest rates will be lesser and you know that SME is generally linked to T-Bill. And seven months down the line, seven months down the line, who knows when interest rate starts falling again? That time, because of its link to not T-Bill, it's linked to repo rate. So when it is linked to repo rate, immediately the repo rate falls, we have to reprice the SME portfolio. I don't see, given the liquidity challenges on the liability side and with still the repricing on fixed deposits going up, I don't think the cost of funds have seen the bottom yet. So to that extent. The peak yet to mean. Peak yet. Yeah. Cost of funds has not seen the peak yet. So it may continue to go up a little bit more. Given that, we wanted to do business only what makes sense for us from a NIM and a profitability perspective. That's why you'll see that both on the SME book as well as on the wholesale book, we had not done a few businesses which would have otherwise ticked up. Also, the old SME book has started running off, which normally happens, but this quarter also there has been a run-off. So there was around INR 170-INR 180 crore of run-off which happened this quarter on the SME side. So given sorry, what is this? 18 crore of run-off. 18 crore of run-off we had. Sorry. We had a 18 crore of run-off on the SME side this quarter. So given that perspective, I think overall the growth is relatively muted. This is also deliberate. And all this contributed towards a 23% growth year-on-year on the bank, which is generally what we do around 27%-28%. And this also has helped us in maintaining a CD ratio of below 83%. Last quarter, the CD ratio was above 87%. Our LCR is quarter end 123% and average is 113%. So all these decisions helped us in managing a more balanced growth with an eye on how the funding cost is going to work and how the linked books will have a challenge in terms of maintaining a mean. So that's broadly what a very prudent decision we took both on wholesale as well as on SME business. Got that, sir. That's very clear. Just one small aspect on growth. So within other retail, I just want to understand what is driving growth. Is it mostly secured assets? In retail? Yeah. When we look at other retail. Yeah. Yeah. Yeah. I think two, three products are doing very well for us. One is on the auto loan side. One is on the auto loan side. One is on the inventory funding is doing well for us. CV/CE, commercial vehicles and commercial equipment is doing for us. And LAP is doing well for us. So these are the four products which are doing well for us. Credit cards also, because it was on a zero base, it is doing well on a year-over-year basis because we started credit cards this year only with alliance with two partners. And while we had grown the unsecured business till the Q2 of this year, but this quarter, we have significantly slowed down our unsecured business based on whatever we had heard in the market. And hence, this quarter onwards, which is Q3 onwards, we have almost slowed down to minimum our unsecured side of the business, not because any issue in the portfolio because it's too minuscule the portfolio to have any problems at all, but because what you're hearing in the ecosystem, we have completely slowed down the personal loan business. Got that, sir. So my second question is coming to the deposit side. So you had earlier alluded to your comfort level with around 90% CD ratio on the peak side. And we have this quarter seen a sharp decline in CD ratios. So would that comfort zone come down here now because we're hearing a lot that RBI has been guiding banks to lower their CD ratio levels? So what's your take on that? On the CD ratio, RBI has said nothing to us yet, okay? But we looked at two things. We looked at the incremental CD ratio, and that's where it went beyond my comfort level. So we have to look at many ratios, just not CD ratio. We looked at the incremental CD ratio, and that was uncomfortable to me. So I said that we will bring down the incremental CD ratio, which automatically will bring the CD ratio down. Secondly, I said 90% is a comfort zone in a comfortable environment when business is usual and everything is fine. But that may not be right when you have a INR 300,000 crore liquidity deficit. I'm a very risk-averse person. So given that perspective, in that environment, because on a small balance sheet like that, these percentages can swing big time this way, that way in a very short span of time. So I would be erring on the side of caution, which would impact my NIM, which would impact my because all this money which is there will go into investments which has almost negative yield, right, right now because these will come around repo rate and things like that, but your funding cost is higher than that. But still, I said that liquidity risk is also a risk in the system. And given the situation, what it is, how do we know what happens next year? So given that, I think we took a conscious call saying that let's wait and watch for a while. It's not that we targeted 83%. I mean, I wish we could do that. It is just that we said that we don't want to do business below a certain rate and with a certain kind of a risk. So once we stop doing that, automatically, we reached a level of 83% on CD ratio. Is it that we can go up to 85%-86%? Answer is yes, okay? And hence, maybe this quarter will be a little lesser cautious, let me put it this way. But to ensure that we do not touch 90%, we needed to apply this caution. So we have applied this caution. Got that, sir. And on the cost of fund side, so when do you see it peaking? Could it easily, comfortably go up for the next two quarters as well given the liquidity environment? Yes. So what will happen, Mona, is completely depends on the portfolio tenor of liquidity deposit tenor of portfolios, right? So typically, people who are sitting on a long tenor, when this interest rate started going up, those things will come for repricing. And people who are sitting on a short-term tenor, their repricing will have already happened. So it depends on that situation, which bank is where. Most of our tenors are typically around one year for us and a little lesser. We don't have very long tenor right now. So I would say that give it another three months for us, I think it will sort of peak, hopefully, okay? But what we don't know is that this liquidity challenge is over because the problem is the incremental business. I thought this quarter, it has peaked. Till the end of the quarter, I saw also CD rates in the market, especially on the shorter term, which is 12 months and below, is very, very elevated. So given the perspective, it is very difficult to say how the cost of funds will go. So we are factoring in a situation where next three to six months, it can still go up. But for us, the deposit repricing reason, I think that will be over in the next three months. Sure. Got that. Just one final question on the credit cost run. We continue to see negative credit costs for the banks for the last couple of quarters. Is this mostly driven by recovery from return of accounts? How big is the return of pool as of now for the banks? That data may not be in the public domain, but I'll give you a sense of your question. So this quarter, I mean, we have been on a negative credit cost for a while now. How many quarters I'm forwarding also, okay? But will it continue forever? Answer is no. Next year, it may not continue at this level. But even if you look at this quarter, let's look at each of the parameters. The slippages are significantly lower than last quarters, okay? The gross formation is also significantly lower than last quarter. The GNPA is lower. The NNPA is lower, okay? So when you look at all the parameters and recovery is also slightly lower than last quarter, but still, it is relatively okay, okay? Given all this, I think we had a very and this is happening when you are INR 106 crore of contingency provision plus another almost INR 53- INR 54 crore of provision because of our conservative provision norm. So overall, I think around INR 160- INR 170 crore of overall additional provision which is there in the system. Not that we want to touch this contingency provision unless it is unless that's the formula what we have done, it is to be touched. So to that extent, we are really sitting on a very, very safe quality portfolio. And negative credit cost may not be forever, but given that slippages, I think that is more important to me than recovery-based negative credit cost. That itself is very, very comfortable. So on this front, I think we are doing very, very well. Got it, sir. Thank you so much. I'll come back in with you. All the best. Thank you, Mona. Thank you so much. Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and one. We have the next question from the line of Manan Tijoriwala from ICICI Prudential Asset Management. Please go ahead. Hi, sir. Good evening. I just had one question. Sir, I see the yields have improved almost 68-70 basis points quarter-on-quarter. So could you walk us through what exactly has changed from last quarter? Because last quarter, we had some gold loans which we paid down, so that brought it down. So how does it come back now? So two things have happened, Mana. Thanks for your question. One is, as I said, that we took a very conscious call of not doing businesses which will come at a low yield, okay? Because I looked at it this way, that what is my incremental cost of deposits for the highest deposit which I'm taking, at highest cost deposit I'm taking? Let's say that is an eight-point-some%. And I said if I take that incremental business, on an incremental basis, why do I need to take that business on the SME side or on the corporate side, which I just explained to Mona? So those businesses we refused. I said that we'll not do businesses on averages. We'll do businesses on marginal costing, which are marginal additions. So that's the way we actually very consciously improved our yield. On gold loans also, if you see that last quarter, we ran off some of this book, okay, which was coming at reasonable, but we have started rebooking some of these businesses now because our what is it called? LTV has now come down to a level where we wanted it to. So given that perspective, we could start booking gold loan at a higher yield again because our LTV is at a comfortable level. But again, if you see a LTV going up to 78%-80%, not because of our reason, but because of market reasons, which is price reason, gold prices fall, then again, our yield will start coming down because then again, we will slow down some of this portfolio, which will come at high yield and a higher LTV. So that is the reason why this will be seasonal to some extent and will vary based on the gold prices. But primary reason for yield increase is basically, we refuse businesses which are coming at very low yield and very competitive yield. We said that on incremental cost on marginal cost of deposits, this is not making sense. It's largely from the gold business then, if I understand correctly, the increase that we're seeing now. Our yields have gone up in retail, in gold, in SME also. I think it has gone up all across. So yield has been an overall story for us. Understood. So one more question. On the CASA plus Retail TV, how is the performance going, and how do you see it from here on? As in if you could say if you could talk about what it was the same time last year versus this year now? So I'll tell you, we have grown CASA by 6%. But I will acknowledge, and I've told it in past also, that it will take us at least one more year to start building the CASA franchise, okay? Because primarily, we have been a gold loan franchise. Most of our customers have not been in that level where you can build a very strong CASA franchise. And till we have the core system in place, while all other things are in place, like the branches, the distribution, the people, the leadership, the products are also in place now. But unless we have the system, I'm not willing to invest after acquiring so many customers where we cannot give the kind of a service and that kind of a thing which, as I said, like Axis can give. Then it will be difficult to build that franchise. So I'm keeping that franchise growth on the CASA, including CAR, only after FY25 onwards. Till then, we'll depend on, to some extent, the Retail TD. It's not that CASA is not growing. CASA is growing, but only at that level, right? And that's the story of the industry also. They are growing slow, but we are growing slower. So what we are doing, we are saying that deposit franchise we build FY 2025 onwards. Till then, to ensure we support our growth, we'll have a funding structure in place, okay? Now, the funding structure will be a combination of CASA will be a small portion of that, and we'll retain a growth of anywhere between 5%-15% or whatever. So the CASA percentage is not going to come up too much if you continue to grow at a 20%-21% on the deposit side. But what will happen is that we are looking at borrowings as another way. Our CD book is also doing well. We have built slightly larger deposits based on our relationship. We have created a vertical on TASC and some of these other relationships. So while we are growing the retail deposits, but at the same time, we are building from the other deposits as well. So this will continue for another year or so, and then we'll start the liability franchise. I'm being very honest about it, that right now, there's no point talking too much about the CASA and retail franchise till our systems and processes are in place. That will be in place, and we have completely planned it out FY 2025 onwards. That's fair enough, sir. That's what I can make it. Thank you. Thank you. The next question is from the line of Prabhal from Ambit. Please go ahead. Hello? Yes, sir. I thought. Prabal. Can I audible? Yes, you're audible. Please go ahead. Okay. So my first question is, again, on this deposit side. So congratulations on the kind of accretion and mobilization that we saw during the quarter. During term deposit, are there particular schemes, say, 190-day schemes or 500-day schemes, which is helping up the mobilization? Yes. Almost every bank has. We also have a particular bucket. And typically, most of the deposits gravitate towards that bucket, which is 400 and how many days? 440 days. I think 440 days is our bucket where we get 7.75%. 7.75%. So that kind of a bucket we have. So most of the one-year-plus kind of a deposit is coming in that bucket. Having said that, there are deposits which also come with a slightly more elevated cost, also closer to 8%. And those are typically slightly larger ticket deposits, typical institutional deposits, etc. And also, we have to understand that in such a way, the entire design has happened between LCR, NSFR, CASA ratio, deposit growth, and CD ratio, the whole complexity is such that there is no escape of doing one kind of a business. You have to have a very balanced business. So I think I must give credit to the team that the way they have built up the entire business, that we have ticked almost all the boxes. Deposit growth, we have ticked. LCR, we have ticked. CD ratio, we have ticked. Only we have not ticked the CASA ratio. And I'm telling you, this will not get ticked for the next two years. Cost of funds, we have ticked, okay? So almost all the parameters, we have ticked. So there must be something which we are doing right on the liability side of the business, in spite of the fact that we are not having our franchise, which will happen FY 2025 onwards. Understood, sir. So then second question will be going ahead into cost of funds arise for us, which is true for the system as well. Which are the segments on the loan side where we can pass on these higher cost of funds? Because gold loans typically are quite volatile. They tend to be in the range of 11%-11.5%. So are there some other segments that you have identified where you can pass on these rates? Yeah. So cost of funds has typically gone up by around 1% or so in the last one year. And on a nine-month basis, year-on-year basis. And cost of deposits have almost gone up by 1.2%-1.3%. So roughly, anything between 90-130 basis points, depending on what kind of cost of deposits we are talking about has gone up, cost of funds we are talking about. How do we pass it on? Answer is, some we cannot. That's why you see that our NIM, in spite of the fact it is 5.11%, it was on a nine-month basis. Last year, on a nine-month basis, it was 5.52%. So 40 basis point sacrifice on NIM has already happened on a nine-month basis. So we cannot pass on everything. Having said that, I think it's a if every business starts picking up a little bit, if so the way I handle it on execution side is very simple. I tell wholesale that if you are at this level, you have to get me 20 basis points more. Same thing I tell SME. So SME has actually given me a much higher yield this quarter, okay? And of course, gold loan also has gone up this quarter. So given that, I think it's that incremental part which it's more of an execution story. It's not that one size fits all. But yes, there is some impact on the NIM which you can already see when you look at a year-on-year basis, roughly around 40-50 basis points impact on the NIM. Okay. And this lets you 20 basis points higher on some segment. This is driven by a more prudent or selective customer basis, or how are they able to generate more yields from the same portfolio? So it's very simple. What we said is that I said that below this rate, we will not do business. In fact, you will be happy to know that there are a lot of banks. When I look at most of the results of the other banks, the variation between yields between one portfolio or one customer to another portfolio, another customer, is anywhere between 6, 7, 8% difference. For us, the highest yield is around 12%. Lowest yield is around 8.7 or 8.9 or something like that. So that range is very low, okay, between 3%-3.5%. That's the way we operate in a very small range. So what it means is, effectively, we are not taking the high risk, okay? We are willing to sacrifice business which comes at where we think that the business otherwise is not right for our kind of a bank at this stage, okay? Some of the other banks can do it because they have other incomes, whether it's on the wealth side, whether it's in the transaction banking side. I'm not saying they're doing wrong business. They're doing the right business. But given the life cycle we are in right now, because our cross-sell opportunity into wholesale and SME is relatively lesser compared to some of these other large banks, so we have to primarily play the yield game. So we play in this 9%-12% range, 12% for gold loans, 12 or lesser than that, actually less than 12% here and more than 9% there. So in that range, we operate. So that's the way we do. So we refuse business which doesn't make sense for us. But that does not mean we're taking high-risky business. We don't do business at 13%-14% also. Okay. Thank you. So let's say if the maximum is just 20% and with our OPEX too. There are some agri-business which can be slightly higher than that, some microfinance which can be slightly higher than that. But they are very, very small in terms of contribution to the portfolio. It is very, very small. I'm taking out the agri and the microfinance business, but they are very small in terms of contribution to the bank. Sorry, your question. Yeah. But let's say with a cost of funds of 5.5% and OPEX to asset of 4%. So if we are doing business at 11%, that is hardly making us money. And in an environment where credit cost is benign, this could still be supportive to us. But as the environment normalizes, could there be a risk of ROE, of return ratios getting diluted because of this strategy? So let me put it this way. I mean, the way you are calculating, then banking business would have never made sense. So I can put a calculation on it here and say that in spite of all this, I am having a NIM of 5.11%, right? So it depends on which statistics you're looking at. Plus, when you look at ROA, we have almost 1.8% ROA, which also happens because now on the fee side, we have now almost 14% consistent basis. We are having 14% non-interest income to total interest income. This used to be on the core non-interest income. This used to be below 5% at some point of time in the bank. So it's how you create the ROA tree overall and how you ensure that you manage the cost of funds and build the right business depending on what ROA you generate. So I don't think that calculation works for us because there will be businesses which also come with lesser risks, okay? There will be businesses which come with a lot more franchise building on the wholesale side in the long run. And also, some of these are funded with lower tenor kind of deposits also from an ILM perspective. So it's more complicated than this. But net-net, we are saying that our NIM will be 5% for the full year or more. And next year, even if it comes down a little bit, it will not go down under 4.5% in any circumstances. ROA, we will be between 1.8%-2%. And next year, we will be even in a difficult phase where our other businesses are picking up, which ROA is lesser, we will be between 1.5%-1.8%. Given that, I think that's the play we'll play, and we should be able to deliver that. Understood. So just last one question. So you mentioned about balancing growth between gold loan portfolio and non-gold loan portfolio. So which sort of segments this quarter, we did see retail picking up by 5% sequential. Going ahead, which segments would you say that are ready for new growth traction and we should start seeing pickup here as well? See, for another two years, we are in love with gold. So gold will continue to do well because it doesn't take away the risk. I mean, it doesn't need risk quite as much. It has high yield. Our losses are the NPA in gold loan is lesser than the bank-level NPA, which itself is only 31 basis points. And gold loan is much lesser than that. And cost of operations is high, but that is already baked into the system. So as long as these equations are there, we'll continue to focus on gold loan and do that business. I'm not saying. I said in the long run, by FY 2030, gold loan will come down to 20%, not because we'll defocus on gold loan, because all other businesses will start picking up after our system starts delivering, which will start from FY 2025 onwards. Having said that, other than gold loan, which of the portfolio will start doing well? This year was muted in wholesale. I think FY 2025 onwards, FY 2025 onwards, our wholesale will start picking up. SME will significantly pick up. Already, SME is showing a 28% growth this year for the first time in a long period. I think they are fully engaged to take the growth further. And retail on a small base will grow much, much faster. But will it materially contribute? Answer is maybe no because ultimately, it is only a 9% mix. 9%-10% are only making too much of a difference. And also, some of the businesses which we didn't do so well, like agri, MFI, and all this this year, agri, we actually didn't grow much. So some of these businesses will start picking up next year. So overall, I think we should be able to grow. Growth in assets is not a problem for us. Our constraint will be, can we grow liability at higher more than 20% consistently with a reasonable cost? So that is something we have to notice. If we are able to grow that, we'll be able to grow proportionately in that. Then we have to choose which one we want to grow. So constraint is liability. Constraint is not growth on the asset side. Understood, sir. Thank you so much for all these elaborate answers, sir. All the best. Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yes, sir. Thank you for taking my question. Two, here. This first one would be, what would be the increase in the rates that we were passed on to the NBFCs given the increase in the risk weightage? And second question would be on the retail loan side, what share of the book is unsecured which you referred to? You slowed down a bit this quarter. What is the second question? Unsecured? What is the share of unsecured loans to the total book? Okay. So on the first question, let me tell you that this I mean, yes, RBI did raise a 25 basis point on NBFC risk weightage, but we have not passed it on as such. Unless there is a renewal happening or something happening, we have not deliberately passed it on. Because my thinking is like this. If there is a risk somewhere, why take high risk, okay? So what we have got is we have got a little more cautious and seeing that which is the kind of NBFCs because what is it? It is a transmitted risk. Hypothetically, if there is a risk that is emerging in the unsecured space and small ticket unsecured space, and if certain NBFCs are doing business there in a large amount, then and if we lend there, then it's a transmitted risk which is coming back to us, right? So that's the challenge. So we have started getting a lot more careful on this kind of NBFCs where this kind of business are happening. And we have refused a lot of these businesses this quarter. So we have taken it more from a risk guidance perspective than a yield maximization perspective. We have not done that, okay? Secondly, going ahead, I think while our NBFC proportion is slightly high in our wholesale book, but we have taken a conscious call of actually growing the other portfolio and which will automatically bring on the NBFC as a part of our listing. So that's the way we are going to manage this. We are taking the RBI direction not as a yield maximization but as a risk management tool. On the second question on unsecured to total, what is it, Satish? No, Pallavi, we don't have this information in the public domain in terms of what is the total unsecured. But if you look at the overall book composition, 48% is a gold loan which is anyway fully secured. Then within retail also, quite a few products which we are doing are secured like CVC and all. Overall for the bank, we do not more than 2%-3%. That's our question. Even SME also, we do a secured business. So it is a very small kind of a percentage. Pallavi, I'll tell you a simple answer. Our unsecured book in the whole bank is well below 5%. Right, sir. Thank you so much. Thank you. To ask a question, ladies and gentlemen, you may please press star and one. The next question is from the line of Shivaji Thapliyal from YES Securities. Please go ahead. Yeah. Thank you for the opportunity. So my question is really regarding having some more color on the broader SME segment. So I just wanted to understand what are the subsegments within SME and what are the ticket sizes and what is the yield maybe for those subsegments. And between these subsegments, are you getting the sense as you are piloting initiatives that maybe one segment is more attractive for you to do at this point in time over the next couple of years? Just some color around what is happening within the SME segment. And also on the retail side, while you have answered, which are the segments that you are seeing traction? But maybe from a long-term perspective, what will be some of your bread and butter retail segments? Will it be affordable housing, which part of vehicle finance? Some color on the subsegments within SME and retail would be helpful. Yeah. Thanks, Shivaji, for both the questions. Both are very critical questions. So let me answer the retail first. Then I will invite our head of SME, Shyam Mani, to give you a full color of the SME business that he's building. On the retail side, again, because you said long-term, so I will divide into short, medium, and long. Long-term, our retail book will exactly look the way the industry looks at it: home loans, personal loans, auto loans, credit cards, all of that in those kind of a proportion because fundamentally, the way we'll build our retail portfolio is based on how our liability franchise is getting built, which means that customer getting acquired, cross-selling to them is we are not going to go out and buy retail business through BSS and all these external kind of channels. So if that does not happen, our retail book will mirror how the customer franchise is building and based on a cross-sell to this. This is how I have built businesses always. This is how we'll build it here. In the short run, till the liability franchise starts picking up, which will take one or two years, till then, we are doing businesses primarily to our internal customers. Also, we are building bridge with the manufacturers, with the end customers directly, etc. And hence, short-term is mirroring those kind of products like auto commercial equipments, commercial vehicles, loan against properties. Sorry. So healthcare business. So these are very niche, direct-to-customers. And you can address this segment in a because this is not distributed segments. These are very concentrated segments. You can address these customers. And with evaluated services, you can with the manufacturer tie up, you can do these businesses. So that's primarily where our focus in the short-term is. But medium to long-term, we'll be exactly mirroring the franchise we'll build on the liability side of the business. That's the way we'll do retail assets business, the typical, classical way of building that business. On the SME side, you talked about the yield and all that. So on the yield, I think we are somewhere between 10%-11% on the yield in SME book, okay? Rest of the things, segmentation, etc., let Shyam answer this. Yeah. Thank you. Thank you, Pallavi. Good evening, all. This is Shyam here. So just to give an outlay brief in terms of the way we have started scaling up on SME business. If I look at purely on a topline growth-to-growth, only on disbursement, both fund-based and non-fund-based put together, we have grown 108% as we speak. So on the net growth, it's hovering around 28% at this point of time. Of course, there's been a late pickup because we were working on setting up our process, systems, and the platforms right and also some of the policy enablement which we need to do, which we have done and post that we are starting to see a momentum in the business. Because if I compare FY 2023, we had ended up at around 5%. It's moved up to 28%. So quarter-on-quarter, there is an upside momentum in the overall net SME book as well. So this year, as we speak, on a fund-based alone, on an overall disbursement, we have done INR 1,066 crores in fund-based. It's a limit set. And both non-fund-based and fund-based put together is INR 1,456 crores. So that obviously talks about there's been a stress on the existing book in terms of some clients we had wanted to attract, and some clients, due to interest rate pressure, we have to let go, as Pralay was mentioning, that we're not compromising on the yield. That's why overall, the momentum and the book growth has been in line with our expectation. Specifically on the ticket size which you asked, the new-to-bank ticket size is around INR 6 crore. The overall ticket size at the portfolio level will be around INR 3 crore-INR 3.4 crore. We follow a hub-and-spoke model, branch-centric, where SME cluster has been identified and the key branch has been identified. We focus on the top 22 branches. Within that, we focus on top 20 branches as catalysts and the next 22 branches as prime branches. Around that, we work with trade bodies, industry association in terms of engaging with them so that we go and reach out to them with an industry solution. We have certain knowledge banking advisory types as well so that there could be a value add to these associations and industries. Primarily, the focus sector for us is manufacturing, within manufacturing, light engineering as well as automobile, healthcare, pharma, food processing, and to some extent, textiles and apparels. That's the way the progress has been. We are very, very positive about further growth on this. Yeah. Thank you for answering that. So my next question was around operating expenses. So I mean, while you have given an ultra-long-term guidance that cost-to-income ratio will decline several years later, but just what is the composition of the cost at this point in time? I mean, how much of that may be technology investments? And for how long will these technology investments kind of continue? And when will they start to taper off? So just some understanding of the glide path when it comes to operating expenses would be helpful. Yeah. So there are three primary costs if you look at the cost line. One is people. One is infrastructure distribution and all this. And third one is technology. So these are the three primary cost lines for us. Within that, as you rightly said, that technology is a highly front-ended investment because we are rebuilding and rebooting the bank from an infrastructure perspective, technology as well as other infrastructure. But the only thing is, a lot of this is CapEx. So it will flow through the P&L over the next four to five years, okay? But most of these investments will be done in the next two years, okay? And then only AMCs and some add-ons here and there will keep happening, which are like OpEx at that point, post two to three years. It will go through for the next four to five years, but it will start tapering off maybe FY 2027, FY 2028 onwards. Then it's a payback period for technology starting from FY 2027, FY 2028 onwards. Hence, the cost-to-income will severely taper off to below 50% by FY 2030, to below 50%. Coming to the other two costs, which is distribution cost, typically, we will add around 75-100 branches every year, which as a percentage, will keep going down as the branches start picking up. On the manpower side, that cost will keep going because we want to keep investing on the acquisition side. Because once we have the technology ready for building the retail franchise, our manpower cost will continue to elevate but not at the same level. We are somewhere around 35%-37% growth, I think, in manpower, around 40% growth in manpower. Cost growth will be somewhere close to 30%, I think. But that will start tapering off in two, three years because especially when you have a ratio of cost-to-income because as the wholesale starts picking up and the SME starts picking up, then on a cost-to-income basis, those are low cost-to-income businesses, right? Especially wholesale is a low cost-to-income businesses. Once that mix starts going up and revenue starts coming from there, then cost-to-income also starts tapering off. So given these three situations, also on branches, not only percentage of branches growth will start coming down. Some of these branches we're investing will start breaking even within two to three years of setting up. And that also will start tapering off. So we have done all these calculations. And that's where we are saying that how we are confident that by FY 2030, our cost-to-income will be well below 50%. Currently, for the next 1-1.5 years, it will remain around 65 odd% or close to it. And then it will start tapering off maybe by FY 2025, 2026 onwards, below 60% and then below 50% by FY 2030. Thank you. Thank you. Participants, you may press star and one if you wish to ask a question. We have the next question from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yes. I just wanted to understand again on the cost-to-income side. Like you mentioned, we have this. Where does it peak? I mean, our FLEXCUBE will be implementing now. So that will get implemented by when? And is that 65 the peak or do we see it going beyond that in the short term? Cost-to-income, will it peak to 55%? No. So see, this is hovering between 60-65 right now. So we are very close to 65, quarter or 2 back. Now, we are back to somewhere around 62%. But these will keep happening because of either income or cost because it's a ratio at the end of the day. So we are seeing between 60-65, we will hover. But for sure, it will start on a glide path starting FY 2025, FY 2026 onwards. And then it will go to below 60 and then below 50 by FY 2030. That's what I said. But right now, it will fluctuate a little bit because of on that quarter, how it has gone in terms of income and cost and things like that. But for sure, the technology cost will be hitting us for the next two years. The tech spend would be what percentage of PDT? Any number? I think for the large banks, it's around 9%-10%. For us, it would be. It will be higher than it will be well above that. Right. And so the absolute amount will, I mean, like you said, on the income side, you can have other incomes. On the absolute amount, would you have some guidance right there, the increase in the absolute amount for the next? We know that number. We know that number, but we don't give it in public domain. It's a significantly higher percentage compared to what you just mentioned for the next two, three years. Right, sir. Thank you, sir. Thank you. The next question is from the line of Mona Khetan from Dolat Capital. Please go ahead. Yeah. Hi, sir. I just had one query on the fee income side. So we have seen a strong growth on the fee side in the last few quarters. But I just want to check whether we still have more levers. Are we already seeing a good contribution from lines like transaction banking, or that's yet to play out for the bank? Very good question, Mona. So the transaction banking side, we have just started. The TFX income will continue to grow as our wholesale side of the business and the SME side of the business starts doing the sophisticated conversations with customers. That will happen now. Transaction banking fee will start going up from next year much more. We have set up the team. In terms of percentage, you will see that we are around hovering between 13%-15%, last quarter was exception. But generally, we will be happy within this range because most of the other banks are in this range except for some large banks who are in the 17% range. This is where our sweet spot is, around 15%. We were 5%, actually. From there, once we have reached there, the easy job is done. Now, how do we go from 14-17 on a consistent basis is the next journey. We'll be happy to there. I think we'll achieve that also at some stage. But also, we must understand that right now, NII is also a little muted right now. So because of that, the ratio sometimes also the ratio is a very funny subject, no? So now, NII also starts picking up, which is good news for us if non-interest income also goes up, interest income also goes up, or overall income goes up. So that is fine. But generally, our sweet spot is between 13-17. Sure, sir. Got it. Thank you. Thank you. Thank you. Participants, you may press star and one to ask a question. We have the next question from the line of Shivaji Thapliyal from YES Securities. Please go ahead. Yeah. Just one clarification. You pointed out that the tech spend is more than the figure that was quoted by one of the previous participants. So the 9% figure that was quoted is to be taken as a proportion of total OPEX or PBT? I mean, so the other. I thought you said PBT. You said PBT, you said, no? Yes. Maybe I got it wrong. You said PBT. Yeah. Yeah. PBT. Yeah. So it's more than 9% of PBT. So how much will it, so it may not be more than 9% of total OpEx. Or what would you peg it at as? No, no. I only responded, Shivaji, to the question which was asked that some of the other large banks are around 9% of PBT. What I'm saying is that ours will be higher than that at this point of time. It may not be forever, but at least for the next two, three years. Yeah. But just to clarify, I think the 9% figure, the ballpark that we have been noticing in other conference calls is as a proportion of total OPEX and not PBT. Oh. Okay. Okay. But I calculated it as a PBT. So it will be higher than the PBT. On the total OPEX, what is our OPEX, Satish? Total income is about INR 500. No, no. OPEX you're saying. What is the total OPEX? 312. Oh. Then it will be much higher than that, okay? Much, much higher. It's much higher than 9% of total OPEX. Okay. Absolutely. Absolutely. This is for the quarter of the year. Oh. This is for the quarter, I think. Oh. What is the quarter? No, no, no. Then it will not be. It will be around that number, close to that number. Understood. Because I reacted, I thought it is talking about the PBT. If it is OPEX, 9% of OPEX, then our ballpark will be there, somewhere there. Understood. Okay. Thank you for the response. I'm done with my questions. Thank you. We have no further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir. Thank you, Shivaji. Thank you, everybody, for participating in our conference call. And look forward to an even more exciting Q4. Thank you very much. Thank you. On behalf of YES Securities, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.